Jake Sullivan “New Washington Consensus” speech
Summer 2023 Sergio Goldbaum
On April 27, 2023, the National Security Advisor Jake Sullivan made a speech on Biden’s international economic policy, where he laid the foundations of a “New Washington Consensus”.
Mr. Sullivan began his speech by stating that the US traditional international economic policy, which had been in force since the Second World War, no longer seems to work. He said, “A shifting global economy left many working Americans and their communities behind. A financial crisis shook the middle class. A pandemic exposed the fragility of our supply chains. A changing climate threatened lives and livelihoods. Russia’s invasion of Ukraine underscored the risks of overdependence.”
According to him, the Biden government's international economic policy faces four fundamental challenges. The first challenge is to boost America's industrial base, which has been hollowed out due to overconfidence in the efficiency of pro-market policies. The second challenge is to adapt the American economy to a new environment defined by geopolitical and security competition. The prevailing international economic policy had also been overconfident that economic integration would bring countries into the rules-based order, but "China is still subsidizing traditional industrial sectors as well as key industries of the future on a massive scale."
The third challenge is the climate crisis and the urgent need for an energy transition. Mr. Sullivan connected this challenge to the opportunity of creating jobs for the middle-class workers in America. Finally, there is the challenge of inequality and its damage to democracy, resulting from a combination of various drivers like the digital revolution, bad economic policies (regressive tax cuts, public investment cuts, etc.), and the "China shock" that has hit America's manufacturing industry especially hard.
The new American foreign policy--a “foreign policy for the [American] middle class”--also has four steps. The first step is laying “a modern American industrial strategy,” one that “identifies specific sectors that are foundational to economic growth, strategic from a national security perspective.” The second step is geopolitical: working with US partners to ensure they are building capacity, resilience, and inclusiveness. Among such partners, Mr. Sullivan mentioned the European Union, Canada, Japan, Korea, Taiwan, India, Angola, Indonesia, and Brazil (“on climate-friendly growth”).
The third step focuses on trade policy: moving beyond traditional trade deals based solely on tariff reductions to innovative new international economic partnerships. Finally, the fourth step involves "mobilizing investment into emerging economies"—supporting solutions that those countries are developing themselves but with capital enabled by a different brand of US diplomacy.
Mr. Sullivan also vowed to protect US technology with "a small yard and a high fence." He mentioned tailored export restrictions against China "premised on national security concerns" (see also ABCI Note – February 2023). Many specialists critically analyzed Sullivan’s speech. Simon Lester, for instance, tweeted that “Jake Sullivan (…) said it's 'flat wrong' to call the Biden administration's international economic policy 'America alone, (…) but I [Simon Lester] think (…) that the policy is 'more alone than before.”
The original Washington Consensus was forged in the 90s, as a set of prescriptions encompassing free-market policies, like privatization, de-regulation and trade openness. Ironically, the New Washington Consensus could not be more antagonistic to the original one.